Former KPMG head sentenced to a year in jail

David Middendorf, former managing partner of KPMG’s Department of Professional Practice, has been sentenced to one year and one day in prison for fraud

Middendorf was convicted in March for his involvement in a scheme to defraud the Public Company Accounting Oversights Board (PCAOB) following a month-long trial in New York.

The case involved a scheme in which Middendorf, alongside five others, acquired confidential PCAOB information in relation to upcoming audit inspections at KPMG, which was then used to revise the firm’s targets, improving its inspection results.

“As the head of the KPMG department responsible for the quality of its audits, David Middendorf was at the top of a chain of corruption that threatened to corrupt KPMG and the PCAOB’s inspections process,” said Geoffrey Berman, Manhattan US attorney.

He said that the sentence recognised “the harm this fraudulent scheme caused to the PCAOB and the auditing profession more generally”.

In addition to his prison sentence, Middendorf was also sentenced to three years supervised release, while a decision on restitution amount has been deferred.

In October last year, co-defendant Cynthia Holder, former KPMG partner and PCAOB inspector, pleaded guilty to one count of conspiracy to defraud the United States and one count of conspiracy to commit wire fraud, along with two counts of wire fraud.

Thomas Whittle, KPMG US’s former national partner in charge of inspections, later pleaded guilty to five conspiracy and wire fraud charges relating to the use of leaked regulatory information.

Another co-defendant, David Britt, will reportedly go on trial separately in October.

 

Originally published in Economia on 12 September 2019.